Jeb Bush, Marco Rubio pushed boundaries of campaign finance

Jeb Bush and Marco Rubio burned through that much cash before joining the heap of failed 2016 presidential candidates, an astounding figure even in the big-money era.

But more important, the Floridians pushed new boundaries of campaign finance, setting examples likely to be copied by other candidates while leaving behind a string of complaints from watchdog groups contending laws were broken.

“They are pilgrims on the path to destroying the campaign finance system,” said Fred Wertheimer of Democracy 21, an advocacy group that filed complaints with the Federal Election Commission, the IRS and the Justice Department.

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For months, Bush insisted he was not a candidate while traveling the country to collect millions for a super PAC. The undeclared status allowed Bush to work closely with Right to Rise and take in unlimited donations instead of the $2,700 individual contribution limit his campaign faced.

By the time Bush announced, he had amassed most of his $100 million “shock and awe” war chest.

Rubio benefitted from a nonprofit that also collected huge donations — at least $16 million — and financed TV ads in early nominating states. The tax-exempt group provided donors with the cloak of anonymity, injecting untraceable “dark money” into the political discourse.

“He took the outside-money world from unlimited contributions to unlimited secret contributions and created a very dangerous precedent,” Wertheimer said.

And both Bush and Rubio’s candidacies contributed to a trend in which LLCs, or limited liability corporations, gave considerable sums to their respective super PACs while making it harder for the public to track the source. One cryptically named entity, IGX LLC, gave Rubio $500,000, resulting in an FEC complaint.

The former candidates did not respond to requests for comment, but people who worked on their behalf said they followed the law. “To my knowledge, Right to Rise super PAC and the campaign fully complied with all FEC rules and regulations,” said PAC treasurer Charlie Spies.

“Conservative Solutions Project looks forward to complying with each and every rule and regulation from the IRS regarding 501(c)(4)s,” said spokesman Jeff Sadosky, referring to the section of the tax code the group falls under. He denies it was set up solely to benefit Rubio.

Breaking new ground

Campaign finance law has long been fiercely debated, from the sway wealthy donors have over politicians to matters of disclosure. The 2010 U.S. Supreme Court decision Citizens United broke the dam, allowing for the creation of super PACs that take unlimited donations not just from individuals but also corporations and unions.

Ever since, mindful of lax enforcement, Republicans and Democrats have raced to get in on the action and the groups they formed have grown more sophisticated. Now most federal candidates — and increasingly those at the state and local level — have their own super PAC. Though the law prohibits direct coordination, ties have become decidedly closer, loopholes exploited.

Bush broke new ground. In December 2014, the former governor announced that he had “decided to actively explore the possibility of running for president of the United States,” but his formal announcement did not come until June 2015. In between, Bush worked with Right to Rise to raise tens of millions of dollars, all the time saying he was still unsure if he’d actually run.

In a memorable slip-up, Bush in May said in Nevada, “I’m running for president in 2016,” before catching himself. “If I run.”

“I think Jeb Bush broke some really important federal campaign finance laws and, having seen him get away with it, candidates in both parties are going to do the same thing in coming election cycles,” said Paul S. Ryan, senior counsel for the Campaign Legal Center. “Our view is that under well-established, long-existing campaign finance laws, Jeb Bush was a candidate for many months before he admitted it publicly.”

Ryan’s group has filed FEC complaints against Bush, but he’s not expecting action. The six-member commission is deadlocked, with three Republican members generally favoring less enforcement out of concern for free speech. Tensions have grown.

“Some say the system will change only if there’s a scandal. But today’s campaign finance system is a scandal,” Commissioner Ann Ravel, a Democratic appointee, said earlier this year.

As a declared candidate, Bush could still interact with Right to Rise but not nearly as closely. He could not dictate how the money was spent, for example. Ads the super PAC produced were often attacks on other candidates, including Rubio, cast as unaccomplished. Some of Bush’s supporters began to complain.

Lines were blurred. Bush the candidate would hold a fundraiser for his campaign and then drive to a nearby location where wealthy donors waited to hear him speak as a “special guest” at a super PAC fundraiser. Bush never directly asked for money, yet for all practical reasons, he didn’t have to.

Spending heavily on one candidate

Bush hindered Rubio’s ability to raise money given their ties to the same donor base in Florida. But Rubio had options. Donors sympathetic to Rubio could give to the super PAC — Conservative Solutions PAC — or the similarly named nonprofit. The groups shared some of the same staff.

Last summer the nonprofit Conservative Solutions Project said it had raised nearly $16 million — exceeding the $9 million Rubio initially raised for his campaign — and much of that went to helping Rubio in the form of “issue” ads. One came the day President Barack Obama announced the nuclear accord with Iran. “Congress can stop it,” an ominous voice said. “Marco Rubio is leading the fight. Tell your senators to join Marco Rubio and defeat Obama’s deal with Iran.”

Critics seized on documents filed with TV stations that indicated the ads were on behalf of “Marco Rubio, candidate for president,” but Conservative Solutions Project said that was a mistake by the stations.

While nonprofits have long existed, Conservative Solutions Project was the first to spend so heavily on a single candidate, experts say. Nonprofits are supposed to promote “social welfare,” but organizers have exploited vague regulations about what that means and how much political activity can be involved. There’s also a diminished threat of enforcement. The IRS in 2013 said it was looking at tightening rules but backed off over an uproar after it began to scrutinize the tax-exempt status of tea party groups.

Watchdogs say examples like Rubio’s demand attention.

“This campaign activity by a social welfare organization violates the statutory requirement that a section 501(c)(4) organization be devoted ‘exclusively’ to social welfare purposes — which do not include intervention in campaigns — and also violates the requirement that a social welfare group serve general community purposes, and not provide a private benefit to any individual or political group,” reads a November letter to the Justice Department from the Campaign Legal Center and Democracy 21.

“It is clear that D.C.’s left-wing elites are incredibly afraid that a positive conservative message focused on solutions will put additional pressure on the Obama Administration and Congress to enact conservative policies that will actually address badly needed reforms,” Sadosky told the Tampa Bay Times in an email.

Using LLCs

Bush and Rubio’s super PACs also demonstrated the increasing reliance on LLC money, which can be harder to trace. In 2010 just five super PACs got more than $25,000 from LLCs, according to the Center for Responsive Politics. This year the number is 32.

Rubio’s super PAC took in $5.2 million from LLCs; Right to Rise got $4.3 million. In many cases the public could tell what corporate interest was behind the money but there were notable exceptions.

Rubio, for example, received $500,000 from IGX LLC. Bush got $150,000 from Tread Standard LLC. In both instances the donor’s identity was not clear, raising questions if the LLC was established as a pass-through to provide secrecy.

It is illegal under FEC rules to give money “in the name of another person and knowingly permitting one’s name to be used to effect a contribution in the name of another person.”

The Associated Press ferreted out the name of the man behind the Rubio contribution because he used the same LLC to give to Rubio’s campaign. The AP reported that Andrew Duncan said he “used IGX to mask the donation because he was worried about reprisals” over his work highlighting human rights abuses in China.

In an interview with the Tampa Bay Times, Duncan said he is “cognizant” about China but said IGX was established for a movie project. Duncan said he gave to Rubio because of Rubio’s work to highlight human rights issues. “In no way was I trying to mask this contribution.”

Regardless, Duncan likely won’t face trouble from the FEC.

This month, the three Republican commissioners indicated straw donors would face enforcement but only in the future because donors did not have “fair warning” on how the law would be interpreted. They were acting on cases from 2012 — things move slow with the FEC — including a $1 million contribution to a pro-Mitt Romney super PAC from an LLC that was set up and quickly dissolved.

Citizens United

As he struggled on the campaign trail, Bush made a surprising statement about Citizens United, the Supreme Court case at the heart of the unlimited and hard-to-trace money flowing into campaigns.

“I would turn that on its head if I could,” Bush said in Nashua, New Hampshire, a position in line with Democrats. Legislation has been introduced in Congress to fix perceived problems, including eliminating the secrecy fueled by nonprofits and LLCs, but Republican members have blocked it on free speech grounds.

Bush’s remark carried an important caveat: He would permit unlimited donations directly to campaigns as long as the contributions are made public within 48 hours and the donor identity is clear. Watchdogs say contribution limits are vital to keeping special interest influence in check.

Some observers have concluded that Bush’s campaign struggles show the limitations of super PACs. But Bush had numerous issues, including his last name and the populist rise of Donald Trump.

“If super PACs didn’t matter, [most] every candidate in the race wouldn’t be using them,” said Wertheimer. “They are now a prerequisite.”

So too could be the “dark money” nonprofit that aided Rubio.

“What Bush and Rubio were able to do,” said Viveca Novak of the nonpartisan Center for Responsive Politics, “was push the envelope. … Every time there is a law or court decision, the candidates and their lawyers find new ways to either work around them or make maximum use of them. Their creativity knows no bounds.”